20th March 2015

EC tries to cope with ISDS in TTIP

Last week, Commissioner in charge of trade Cecilia Malmstroem stated that she in principle supported the idea of an independent and permanent international arbitration body to govern investor-state dispute settlement (ISDS). Clauses on ISDS are among the most controversial in the TTIP and other currently negotiated trade agreements. The ISDS mechanism usually uses ad hoc arbitration bodies. However, the former Commissioner Viviane Redding earlier proposed the creation of a permanent international body. This idea was in principle welcomed by the current Commissioner Malmstroem. She nevertheless stated that such ISDS solution would only be feasible in the longer term and could not be operational immediately. For the time being, therefore, an interim measure would in any case be needed. Commissioner Malmstroem presented also some of her ideas on such ISDS mechanism. As in CETA, the trade deal with Canada that had already been signed and awaits ratification, the TTIP would include a provision that investors must respect that the regulatory environment in place when they make the investment need not stay such indefinitely and might change to their detriment. Such change, which is the exclusive competence of every government, could not therefore be considered a cause for arbitration. This touches upon one of the points of criticism. Especially certain NGOs fear, that ISDS could be used as a trojan horse into the regulatory environment, enabling transatlantic investors to enforce lower standards on the pretext of investment protection. Also, responding to criticism about possible biased judges, the Commission will consider making a binding list of possible judges for the arbitration tribunals, every one of which would need to be a high-level lawyer or judge in his/her country. Also, the possibility of an appeal body would be considered – one of the points of criticism being that the ad hoc tribunals in fact issue non-appealable decisions. Such appeal body could also serve as the first stage towards the creation of the permanent investment protection arbitration body.

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Members of the American Chamber of Commerce in the Czech Republic